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Friday, April 27, 2012

Facebook and the IPO

For quite a while now it seems as though news keeps
broadcasting information about the upcoming Facebook IPO, what it means for the
company, will it be delayed, ect, and ect.

First off, for those who might not be stock savvy, what is
an IPO?

Well, right now Facebook as a whole is owned by a small
group of people. An IPO means that the Facebook owners are going divide up the
company into shares, and sell a portion of them to the public (making many of
those original owners quite wealthy). The price they will sell at is determined
confidentially in discussions between the heads of the company and a few large
banks/brokerage firms who will try to quantify how much the company is worth
now, and what it will be worth in the future. Once the shares are open to the
public, they will be bought and sold like any other stock.

Facebook will then have these stocks as a kind of currency.
If they wanted revenue to improve the platform, they could sell more shares
(until they run out, that is). They could also use shares to hypothetically buy
another company. In the distant future, if Facebook ever decided that the
stocks were trading below their true value, they could potentially buy the
stocks back up again.

How will the Facebook IPO do? No one really knows. There is
certainly a great deal of hype surrounding it, and it is seen as one of the
most significant IPOs in recent history. On the other hand, other media
platforms such as LinkedIn and Zynga have already done an IPO, and stock
performance has been mixed. Only time will tell.

One this is for sure, and that is social media is here to
stay. Facebook has led the charge and continues to innovate and update, and
many people do have high hopes about what will happen.

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